Exclusive-Intel CEO to pitch board on plans to shed assets, cut costs, source says By Reuters

By Max A. Czerny and Milana Finn

Intel Chief Executive Pat Gelsinger and top executives are expected to present a plan later this month to the company’s board to cut non-essential businesses and reorganize capital spending in an effort to revive the fortunes of the once-dominant chipmaker, a person familiar with the matter said.

The plan will include ideas on how to cut overall costs by selling businesses, including the programmable chip unit Altera, which Intel can no longer finance from the company’s previously huge profits.

Gelsinger and a number of senior Intel executives are expected to present the plan at a board meeting in mid-September, according to the same source.

Details of Gelsinger’s proposal are provided here for the first time.

Intel declined to comment.

The proposal does not yet include plans to break up Intel and sell its contract manufacturing operations, or foundry, to a buyer such as Taiwan Semiconductor Manufacturing Co., according to the source and another person familiar with the matter.

The presentation, including plans for manufacturing operations, has not yet been finalized and may change before the meeting.

Intel has already separated its alloy manufacturing business from its design business, and has been reporting its financial results separately since the first quarter of this year.

The company erected a wall between its design and manufacturing operations to ensure that potential customers of the design department could not access the technology secrets of customers who used Intel’s factories, known as fabs, to make their chips.

Intel is having one of its worst periods in trying to catch up with the AI ​​era, facing off against the likes of Nvidia (NASDAQ: ), the dominant AI chipmaker with a market cap of $3 trillion. Intel, by contrast, is now worth less than $100 billion after a disastrous second-quarter earnings report in August.

The proposal that Gelsinger and others will likely present will include plans to scale back the company’s capital spending on plant expansion. The proposal could include plans to temporarily or completely halt its $32 billion plant in Germany, a project that has reportedly been delayed, according to the person.

In August, Intel said it expected to cut capital spending to $21.5 billion in 2025, down 17% from the current year, and issued a weaker-than-expected forecast for the third quarter.

In addition to the CEO and executive team’s plans, Intel has retained Morgan Stanley and Goldman Sachs to advise the board on which businesses Intel can sell and which it needs to keep, according to two people familiar with the consulting firm’s plans.

Intel has not yet requested bids for the product units, but is likely to do so once the board approves the plan, according to the two people familiar with the company’s advisory plans.

Altera Spin Out

The mid-September board meeting is of utmost importance to the former chip king. Intel reported disastrous second-quarter results in August, including halting dividend payments and cutting its workforce by 15% in an effort to save $10 billion.

Weeks later, chip industry veteran Lip-Bo Tan resigned from the board after months of debate over the company’s future, Reuters reported, creating a void of deep semiconductor expertise on the board.

On Thursday, Gelsinger, after the Reuters report, sought to reassure investors about the company’s poor financial performance.

“The past few weeks have been difficult, and we have worked hard to address the issues,” Gelsinger said at a Deutsche Bank conference.

Gelsinger said the company is “taking seriously” what investors have said and that Intel is focused on the second phase of the company’s transformation plan.

Some of those plans will remain unresolved until a mid-September meeting, after which company executives will likely make crucial decisions about which companies Intel will keep and which ones it will shed.

Among the potential units the company might look to divest is its programmable chip unit, Altera, which Intel acquired for $16.7 billion in 2015. Intel has already taken steps to spin it off as a separate but still wholly owned subsidiary and has said it plans to sell part of its stake in a future IPO, though it has not set a date.

But it’s also possible that Altera could be sold outright to another chipmaker interested in growing its portfolio, and the company has quietly begun exploring whether a sale is possible, according to a source familiar with its advisory plans and one of the sources familiar with the business cutback plans.

Infrastructure chipmaker Marvell (NASDAQ:M) is one potential buyer for such a deal, according to one of the people.

Bloomberg had previously reported that there were various options for Intel, including a potential split of Intel’s product design and manufacturing business, which is expected to be discussed at a board meeting.